Full text of Federal Reserve Bank of New York Circulars : 98. Amount of Currency Held by Reporting Money Pool Banks

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

CIRCULAR N O . Q8

FEDERAL RESERVE BANK
OF NEW YORK
NEW
To

YORK,

Feb.

i,

1918.

THE C A S H I E R :

In order to enable the sub-committee of the Liberty Loan Committee to deal with the
money situation during the flotation of Government loans, it has been found advisable to revise
somewhat the present form of report to secure the following information:
First:

Amount of b a l a n c e s carried with the reporting institution by
banks, trust companies and savings banks located outside of the City
of New York, excluding balances maintained by foreign institutions.

Second:

Amount of s t r i c t l y call loans to brokers carried by the reporting institution for the account of out-of-town banks, bankers,
firms and corporations.

Third:

Amount of t i m e loans to brokers carried by reporting bank for
account of out-of-town banks, bankers, firms and corporations.

Fourth:

Amount of s t r i c t l y call loans to brokers carried by each reporting bank for its own account. (Call loans specified in 2 and 4
to be interpreted as strictly call loans made to brokers and security
dealers, payment of which m a y be required on the day called, in accordance with the stock exchange practice, or on at least not more
than three days' notice.)

Fifth:

Amount of t i m e loans to brokers carried by each reporting
bank for its own account.

Sixth:

Amount of commercial paper, and acceptances owned and
held by reporting b a n k eligible either for discount or sale or as collateral for loans a t the Federal Reserve Bank.

Seventh:

Amount of unpledged Liberty Loan bonds held by reporting
bank.

Eighth:

Amount of unpledged United States certificates of indebtedness held by reporting bank.

Ninth:

Amount of unpledged loans made to customers by this bank,
secured by Liberty Loan bonds and United States certificates of indebtedness.

Tenth:

A m o u n t of securities ( C o l l a t e r a l v a l u e ) owned by the reporting b a n k in addition to and not included in those reported under
No. 6 which m a y be accepted by the Federal Reserve Bank as collateral to secure Government deposits as prescribed by the Treasury
Department Circular 92.




Eleventh:

Reserve position of the reporting bank computed in accordance
with requirements of state or national law, whichever is applicable.

Twelfth:

Amount of currency and coin held by reporting bank, subdivided as follows:
(a)

Gold and Gold Certificates

(b) National Bank Notes
(c)

All Other Currency

For the present, one report a week, at the close of business each Friday, to reach us not
later than Monday morning, will be sufficient. Later the committee will call on you daily for
the information outlined above, in which event, we trust that you will find it possible to
cooperate with us.




'••

Very truly yours,
i

. R.

H.

TREMAN,

Deputy Governor.

FEDERAL RESERVE BOARD
WASHINGTON '

April 2, 1918.'

Dear Sir:
In connection with the authority of banks to accept drafts
against transactions involving the export of goods, the attention of
the Board has been called to certain acceptance transactions, the contract or pledge against v/hich reads as follows:
"Y/e held against export orders received
through United States Food Commission for the
Allies, goods in excess of one hundred thousand
dollars (0100,000.00) and shall continue to so
hold in excess of this amount during the life of
and for account of our drafts, #2753 to #2756 inclusive, for Tv/enty-five thousand dollars
(025,000*00) each, dated March 18, 1918, payaole
ninety days after sight, drav/n upon you, until
samo are fully paid.
"V/e hereby undertake to pay into your
hands one day before the maturity of these drafts
the amount required to retire them."
The question arises whether the bank is authorized to accept
these drafts.
(a) On the ground that it is a domestic
transaction .and is secured at the time of acceptance by warehouse receipt or other similar document conveying and securing title to the bank, or
(b) On the ground that the drafts are
drawn in a transaction which involves the export
of goods.
The opinion of counsel on this question> in v/hich the Board
concurs, is as follows?







-2"It appears that certain dealers in
staples v/ho have a large domestic business are
under contract to export food to the allies.
The
question has arisen to what extent and under v/hat
circumstances member banks may accept drafts or
bills of exchange drawn by such dealers.
(1) Where the drafts are drawn in a
domestic transaction, under Section 13 they must
be accompanied by shipping documents or the bank
must be secured at the time of acceptance by a
v/arehouse receipt or other similar document conveying or securing title to the goods involved.
(2) Y/hero the draft grows out of a particular transaction involving the expert of goods
the regulations of the Board require that the bill
must have been drawn under a credit opened for the
purpose of conducting or settling accounts resulting from such transaction.
In other words, it must appear that the
bill is drawn and the proceeds are used in connection v/ith the export transaction.
The Federal
reserve bank must be satisfied either by reference
to the acceptance itself or otherwr.se that it is
eligible for rediscount.
Satisfactory evidence
of the eligibility may consist of a stomp or certificate affixed by the acceptor in form satisfactory to the Federal reserve bank.
In the case under consideration it is
assumed that the dealer is engaged in the purchase
of goods for export and is purchasing the same
character and class of goods for domestic use.
Some difficulty may be encountered, therefore, in
ascertaining whether the goods purchased in any
particular transaction are to be used for export
or for domestic consumption.

given to
ing bank
out of a
and what

You have asked that consideration be
the question of what evidence the acceptshould require if the acceptance grows
transaction involving the export of goods
form this evidence should take.

It is respectfully suggested that v/here
the dealer desires to finance the purchase and
sale of goods to be exported his contract v/ith the
bank should provide (a) that he has entered into a
contract for the export of the goods of a fixed
amount; (b) that the total amount of drafts drawn
by him under the credit opened to finance the export
of such goods shall at no time exceed the aggregate
amount of the import or export transactions contracted for and in process of execution; (c) that

-3the proceeds of drafts drawn against the accepting
bank under this credit are to be used in connection
with the export contracts referred to, and that the
proceeds of the sale of the goods exported will be
applied in payment of the acceptances unless the
dealer has in the meantime placed the bank in funds
to meet them at maturity or has secured such acceptances by shipping documents, warehouse receipts or
other similar document convoying and securing title
to readily marketable staples.
Unless the dealer can and will assure
the bank that the proceeds of the credit are to be
used in an export transaction and that the proceeds
of the goods exported are to be used to liquidate
the acceptances, the dealer should be required to
treat the bills as drawn in domestic transactions
and the bank should require security provided by
Section 13."
Please convey this information to accepting banks in your
district.
Very truly yours,
\7. P. (J. Harding,
Governor.

To the Chairman of the Board,
The Federal Reserve Bank,
New York City.